Institutional investors in the Mena region remain concerned about political risk and are favouring funds in the GCC as a result, a survey has revealed.
However, asset allocations are shifting towards equity-based mutual funds and hedge funds, and away from fixed income, the MENA Asset Management survey conducted by FTSE Global Markets and the Qatar Financial Centre (QFC) Authority revealed.
Saudi Arabia, Qatar and the United Arab Emirates were identified as the investment destinations by the 90 investors in the survey, which was drawn by 12 countries. They cited the lower political risk and greater market liquidity of these markets. Countries with a perceived political risk fared worse, with Syria, Lebanon, Jordan and Egypt rated the most negatively by investors.
On-going political strife in North Africa and the Levant is likely to increase cross-border capital flows and further concentrate assets in more stable economies, the report concluded.
Andrew Neil, Head of Research and New Media at FTSE Global Markets, said: “Heightened political risks in the MENA region has two effects: the concentration of assets in those countries that are deemed more stable, and a shift in the types of assets employed. It is no surprise then that in the more stable markets in the GCC investors are increasingly looking at equity-based investments and in the riskier markets in the North Africa and Levant bonds seem to be the investment vehicle of choice, particularly the relatively safe haven of sovereign bonds.”
Yousuf Al Jaida, Chief Strategic Development Officer of the QFC Authority added: “This latest survey shows how investor sentiment towards the region is influenced by global as well as regional trends such as shifts in flows of trade and capital.”